GST and rental expenses for vending machine operators

Is the entity, a vending machine operator, entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it pays rent for floor space, from which it operates its vending machines?

Yes, the entity is entitled to an input tax credit under section 11-20 of the GST Act when it pays rent for floor space, from which it operates its vending machines.

The entity is operating a vending machine business. The entity pays rent on floor space, which it uses to operate its vending machines. The supply of the floor space to the entity is a taxable supply. All supplies the entity makes from the vending machine are taxable supplies. The entity is registered for goods and services tax (GST).

Under section 11-20 of the GST Act, an entity is entitled to an input tax credit for any creditable acquisition that it makes. Section 11-5 of the GST Act provides that an entity makes a creditable acquisition if: • it acquires anything solely or partly for a creditable purpose; • the supply to it is a taxable supply; • it provides, or is liable to provide, consideration for the supply, and • it is registered or required to be registered for GST.

The first requirement in section 11-5 of the GST Act is that the entity makes the acquisition solely or partly for a creditable purpose.

Subsection 11-15(1) of the GST Act provides that an entity acquires a thing for a creditable purpose to the extent that it acquires the thing in carrying on its enterprise. The entity is paying rent on floor space it uses to operate its vending machines from. Therefore, the acquisition has been made in carrying on the entity's enterprise and is for a creditable purpose.

The supply of the floor space to the entity is a taxable supply, paying the rent is consideration for the supply and the entity is registered for GST. As such, the entity makes a creditable acquisition under section 11-5 of the GST Act.

Therefore, the entity is entitled to an input tax credit under section 11-20 of the GST Act for the rental expenses when renting floor space to carry on its enterprise.